The default is not an option as major creditors (Bondholders) are:
i) Greek Banks
ii) German and French Banks
None of them is keen in impairing its Current assets. And let alone the greek banks (who cannot rule the fight) Frenchs and Germans have made clear by participating in the aid package that default is not in their best interest.
The EU/IMF package is a lifejacket for Greece but the coast is far away and there are sharks and around the reef.
And guess what!
Other countries are paraschouting in the same drop jone where Greece floats, far away from the reef.

Fools rush in
Where wise men never go
But wise men’re never broke
So how are they to know
How well we lived
With lunch and dinners so and so
But now we strike
Cause you made us do so
When you pay
My life begins again
Open up and pay today
And let us greeks
Live as fools again

@ Teutonicus:
.."but here, we're just utterly fed up with the combination of Greek failure + indecency (first cheat + lie, than attack those who will help you most, namely Germany) - and I'm writing that as a rather PHILHELLENIC fellow..."

You say that we "cheated", you know very well that these accounting "tricks" are very common among many EU countries. Even the EU itself is unable to publish solid financial reports as they cannot agree internally. By the way I am NOT defending our politicians, just trying to put things into perspective here.
Why do you only mention us, and why do you paint a whole nation with the same brush?
You have no idea how fed up WE (Greeks) are with all these people who brought us to this state. What makes it even worse, is the northern European idea that we have been living like tycoons during the last 10 years, while most of us had to keep 2+ jobs to get by. This money never reached Joe Public here, and I will be more than happy to send the whole 300 lot (our MPs) to jail.
We have nothing against the German people (I'm 25% German by the way), we just don't appreciate the generalising and insulting comments: "You bankrupt Greeks sell your islands and the Acropolis too", get my point?

The Economist analysis is wrong as already pointed out in other blogs. The numbers just don't add up. They also assume the extremely negative scenario of negative growth for the next 5 years. The analysis also fails to understand the imensly (unimaginable for western standards) inefficient public sector. If the structural reforms of the IMF have even moderate success than GDP growth is a certainty in 3 years time.
What also is amazing is the rush of the Economist to write off the current IMF/EU effort as too little. Take a breath the Economist. Macroeconomic models don't always take into account the reality ont he ground. Greek people would greatly appreciate in these difficult times if you see the glass half full instead if half empty.

Greece is getting made an example of in the press and in policy circles. That is not to say Greece is a functioning financial institution.... it is not. It's debt burden will last for years longer than the economist projects, its statistics are still fuzzy (eurostat is a joke for not sorting that out years ago) and on its government used every accounting trick available to hide debts until they were at untenable levels.

That said, Greece is simply being made an example of. The increases deficit in Ireland and its bleak prospects for growth, the sheer size of the Italian debt, and most importantly the Portuguese and Spanish debts and GDP contractions are the story. Greece must be saved now to literally force these other players hands OR to put a mechanism in place (specifically for Ireland) in case one of these other countries defaults... and again barring ~3-5% annual growth Ireland probably will.

In essence, there is a much more sizable force than the Greek nation (whose leadership is more to blame than its people) that will essentially erode the Euro for the next 5 years at least. Now this is not necessarily a bad thing, as long as it is slow. But if you make the example of Greece now, get the fear out, these much bigger events will fall in line easier. In any event the big picture is rolling over of sovereign debt which will bring down the euro's value.

As an American, the same thing is happening to the dollar, I don't see MAJOR dollar gains against the euro unless Spain or possibly Italy turns out worse than expected. But it does mean the euro will have a consistent debt drain on it from Greek and Ireland in the least, and hurt its chances as overtaking the dollar as the reserve currency (if anyone still believed in that).

Truly feels like the East continues to win and the West continues to not.

Well, there's no more room for uncertainty: As of today, Greece officially claimes it can't serve it's debt anymore, which is the standard definition for default.

Forgive me my bluntless, but here, we're just utterly fed up with the combination of Greek failure + indecency (first cheat + lie, than attack those who will help you most, namely Germany) - and I'm writing that as a rather PHILHELLENIC fellow... .

Fools rush in
Where wise men never go
But wise men’re never broke
So how are they to know
How well we lived
With lunch and dinners so and so
But now we strike
Cause you made us do so
When you pay
My life begins again
Open up and pay today
And let us greeks
Live as fools again

Save your breath, mate. As of today, it is oficial: GREECE IS BROKE. PERIOD. And, yes, there will be more austerity measures introduced - but not by the Greek government, but by the IWF."

"IWF"? Independent Women's Forum? Well, feminism is rife over here, though I didn't know how much ;-)

Regarding the rest of your comment, let's wait and see...... Remember the sarcastic and stereotyping publications/ads that appeared in the German/Dutch media before th e2004 Olympic games, certain that the games would be delayed and generally bad? I'm sure you do, it's a rhetorical question). Greece can be as unpredictable as it's debt....

Of course default lawyers say a Greek default "could be easier than people think". They are the ones who would a tonne of money on the disaster.

The EU rescue package did not "assume" deficit reduction, it prescribed it, and any assistance was always predicated on assurances from a new government, not responsible for last year's bungled management, that the state deficit was under control.

Obviously, if the deficit is not under control and no one is even sure of its entity, then all bets are off.

Let Greece default NOW (that is, have the creditors share in the loss instead of socializing the risk and allowing ceditors to privatize the gains), and only THEN help it on the way out by offering it fresh loans under strict IWF + ECB oversight.

Granting these loans now is as a waste of money; it gives Greece a few more months before it ultimately collapeses, sets a wrong precedent ("moral hazard") and helps those investors who were blind to the risk of Greece's default and should not be rewarded for it.

Ok, I'm not going to deny that successive Greek Governments have messed it up big time during the last 30 years, but something is very strange here...
What started as an overblown response to a high national debt/deficit, is now becoming a manic obsession. It appears that certain interest groups and their publications are desperately trying to "convince" the world that Greece WILL default, in fact they have been using their influence and power to effectively make it happen!!
Yes, the Greek problem exists, yes it is big. But they have not convinced me that they are as "surprised" as they pretend to be.
The current Greek Government has announced and imposed very strict austerity measures, which have been approved by the EU and the markets. Additional measures are on the way. Still th aforementioned sources play the same record...."Greece will default, please believe us, Greece WILL default"....
The Emergency loan will probably be used (which will provide "breathing room" until the results of the new measures kick in), again the same response, like a broken record...... makes one wonder.

1.
In August (major holiday time in EU) Greece will ask for next bail-out. Be sure of this, it’s already in the plans.

2. Lyrics by Papandreou

Fools rush in
Where bankers fear to tread
I had to come to you
My wallet above my head
And as you see
I have no money left
The danger here
It’s if you don’t pay my debts
But I don't care
I’m out on the beach
And you now me well
Since many, many years
Don’t be afraid, have no fears
I’ll pay back
When other fools rush in.